Best EPS Stocks on the TSX: Top Picks for High Earnings Growth

 Investors looking for strong, profitable companies often turn to earnings per share (EPS) as a key metric. EPS measures a company’s profitability by dividing net income by the number of outstanding shares. A high or growing EPS indicates strong financial performance, making such stocks attractive for long-term investment.

In this article, we explore some of the best EPS stocks on the Toronto Stock Exchange (TSX) that have demonstrated consistent earnings growth, financial stability, and potential for future returns.

Why EPS Matters in Stock Selection

EPS is a crucial indicator because:

  • Profitability: Higher EPS means the company is generating more profit per share.

  • Growth Potential: Rising EPS signals improving financial health.

  • Valuation: Investors use EPS to calculate the price-to-earnings (P/E) ratio, helping determine if a stock is undervalued or overvalued.

Companies with consistent EPS growth are often market leaders with strong competitive advantages.

Top TSX Stocks with High & Growing EPS

Here are some of the best EPS stocks TSX, categorized by sector:

1. Financial Sector: Royal Bank of Canada (RY)

  • EPS (TTM): ~$8.50

  • P/E Ratio: ~13x

  • Why Invest?

    • Canada’s largest bank with strong domestic and international operations.

    • Consistent dividend growth (over 5% yield) and share buybacks.

    • Resilient earnings even in economic downturns.

2. Energy Sector: Canadian Natural Resources (CNQ)

  • EPS (TTM): ~$7.20

  • P/E Ratio: ~10x

  • Why Invest?

    • One of the largest oil and gas producers in Canada.

    • Strong free cash flow supports dividends and share repurchases.

    • Benefiting from high energy prices and efficient operations.

3. Technology Sector: Constellation Software (CSU)

  • EPS (TTM): ~$35.00

  • P/E Ratio: ~30x

  • Why Invest?

    • Leader in acquiring and growing vertical market software businesses.

    • Exceptional long-term EPS growth (20%+ annually).

    • Strong management and high return on equity (ROE).

4. Industrial Sector: Canadian Pacific Kansas City (CP)

  • EPS (TTM): ~$4.00

  • P/E Ratio: ~25x

  • Why Invest?

    • Only transnational railway in North America (Canada-U.S.-Mexico).

    • Revenue and earnings growth from expanded operations post-merger.

    • High operating margins in the rail industry.

5. Consumer Staples: Alimentation Couche-Tard (ATD)

  • EPS (TTM): ~$3.50

  • P/E Ratio: ~18x

  • Why Invest?

    • Global convenience store giant (Circle K, Couche-Tard brands).

    • Aggressive expansion and acquisitions driving earnings growth.

    • Recession-resistant business model.

How to Evaluate EPS Stocks on the TSX

When selecting high-EPS stocks, consider:

1. EPS Growth Trend

  • Look for companies with consistent year-over-year EPS growth rather than one-time spikes.

2. P/E Ratio Comparison

  • A low P/E relative to peers may indicate undervaluation.

  • A high P/E could mean overvaluation unless justified by high growth.

3. Industry and Economic Conditions

  • Some sectors (e.g., tech, energy) have higher EPS volatility.

  • Defensive stocks (e.g., utilities, consumer staples) offer stable EPS.

4. Dividend Payout Ratio

  • Companies with high EPS often pay dividends.

  • A sustainable payout ratio (under 60%) ensures dividend safety.

Risks of Investing Based Solely on EPS

While EPS is a strong metric, it has limitations:

  • Accounting Manipulations: Companies may adjust earnings through write-offs or one-time gains.

  • Share Buybacks: Reducing shares inflates EPS without real profit growth.

  • Sector Differences: Tech stocks may reinvest profits (lower EPS but high growth potential).

Always analyze cash flow, debt levels, and revenue growth alongside EPS.

Conclusion: Best TSX Stocks with High EPS

Investing in best eps stocks Tsx can lead to strong returns, especially when combined with consistent growth, solid fundamentals, and reasonable valuations. The stocks listed above—RY, CNQ, CSU, CP, and ATD—are among the best in their sectors, offering both earnings strength and long-term potential.

Before investing, conduct further research or consult a financial advisor to align these picks with your portfolio strategy.

Would you like a deeper analysis on any of these stocks? Let us know in the comments!

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